CARES Act Update

by | Apr 16, 2020 | COVID-19

As the Treasury continues to release guidelines in response to the COVID-19 crisis, we will
provide a summary of important provisions for your consideration.

Extended 1031 exchange identification and exchange periods
  • Exchangers whose 45-day identification period or 180-day exchange period falls
    between April 1, 2020, and July 15, 2020, will have until July 15 to complete these actions.
  • It is not clear if the above extension would apply retroactively to revive failed exchanges
    that have already distributed the exchange proceeds because of a missed deadline.
  • It is also not clear if the IRS would extend these deadlines by 120 days from whenever they would otherwise have run out.
  • We will keep you updated as we learn more.
Increased interest expense deduction limitation – Tax Code Section 163(j)
  • Under the Tax Cuts and Jobs Act (“TCJA”), a business and real property owner is only
    allowed to deduct the interest expense it pays on its loans to the extent the amount
    does not exceed 30 percent of the entity’s adjusted taxable income (“ATI”). Business
    may elect out of the limitation in return for accepting less favorable ADS depreciation
  • Under the CARES Act, for taxable years beginning in 2019 and 2020, the allowable
    interest deduction has been increased to 50% of ATI. However, the 2019 increase does
    not apply to partnerships.
  • The IRS issued guidance on April 10 allowing taxpayers to withdraw prior irrevocable
    elections made to avoid business interest limitations but inadvertently disqualified
    improvement property that would otherwise qualify for immediate expensing under the
    CARES Act.
  • The IRS has also provided guidance on how to:
    1. elect out of the 50 percent ATI limitation for taxable years beginning in 2019 and
    2. use the taxpayer’s ATI for the last taxable year beginning in 2019 to calculate the
      taxpayer’s section 163(j) limitation for the taxable year 2020, and
    3. elect out of deducting 50 percent of excess business interest expense for taxable
      years beginning in 2020 without limitation.
Extended filing, payment, and other statutory deadlines

• Taxpayers with a Federal income tax return or payment due on April 15, 2020, is automatically extended to July 15, 2020.
• The deferment applies to all taxpayers, including individuals, trusts and estates, corporations, and other non-corporate tax filers as well as those who pay self-employment tax.
• Please visit the special Coronavirus Page on here for more detail.
• California has also conformed to the extended due date to file and pay. For a complete list of extensions on, please click here.
• In addition, you may check the status of your economic impact payment status on the
IRS website here.

Disclaimer: The information contained in this publication is intended solely to provide general guidance on matters of interest for the personal use of the reader, who accepts full responsibility for its use. In no event will Fishman, Block + Diamond, or its partners, employees, or agents, be liable to you or anyone else for any decision made or action taken in reliance on the information in this website or for any consequential, special, or similar damages, even if advised of the possibility of such damages.